Thanks so much for taking the time to weigh in @Critter-3 and @dmertz! 🙏
So to clarify, let me know if this makes sense and the statements at the end are correct:
- Start of 2020 - There is $15k in a traditional IRA.
- A few months later - $5k is contributed to the traditional IRA through a 2019 (prior year) nondeductible contribution. (Not sure if it matters that the contribution was for 2019 vs 2020 tax year)
- On the same day as in step 2) - $5k is transferred from the traditional IRA into a separate Roth IRA.
- Later in 2020 - Your traditional IRA increases from investments by $1k.
- Later in 2020 - You rollover all of the money in the traditional IRA ($16k) into an employer's traditional 401K.
- Dec 31, 2020 - There is $0 in all of your traditional IRAs.
- Dec 31, 2020 - The Roth IRA now has $5010 after interest (I don't think this is relevant).
- For 2020 Tax year - For tax purposes when filling out Form 8606, you need to pay $0 for the $5k that gets put into the Roth IRA. You don't need to pay anything for the Pro Rata Rule because the $5k contributed to Roth is seen as 100% post-tax. The $16k pre-tax that was transferred to the traditional 401k is now treated as a normal money in a traditional 401k.
Let me know if this makes sense!
